Mindspeed was the owner of seven patents and plaintiff WiAV Solutions LLC was a licensee, claiming to be exclusive. Prior to WiAV becoming a licensee, various predecessors-in-interest had granted the following licenses to third parties:

Entity

Potential Licensees

Patents

Rockwell Science Center

Rockwell International and Affiliates

All

Conexant

Subsidiaries Spin-offs Joint Development Partners

(limited to Conexant Products)

All

Mindspeed

Subsidiaries Spin-offs Joint Development Partners

(limited to Mindspeed Products)

All

Skyworks

Qualcomm

(but promised not to grant new licenses)

All

Qualcomm

Affiliates

All

Sipro

Anyone

(limited to Mindspeed Products in the field of WLAN)

‘573 and ‘493 patents

WiAV sued a number of defendants for patent infringement. Not surprisingly, the defendants claimed that WiAV lacked constitutional standing, since it was not the exclusive licensee of the patents.

It is without dispute that one can be an exclusive licensee despite the license being subject to pre-existing non-exclusive licenses. What was disputed was whether those licensees’ right to grant sublicenses meant that the WiAV’s license wasn’t really exclusive, and therefore WiAV without standing to bring the infringement claim. The court said not necessarily:

This court has explained that a party has the right to sue for infringement of the patent “if that party has a legally protected interest in the patent created by the Patent Act, so that it can be said to suffer legal injury from [the] act of infringement.” Such a party is commonly referred to as an “exclusive licensee.”

. . . .

Depending on the scope of its exclusionary rights, an exclusive licensee may have standing to sue some parties and not others. For example, an exclusive licensee lacks standing to sue a party for infringement if that party holds a preexisting license under the patent to engage in the allegedly infringing activity. Similarly, an exclusive licensee lacks standing to sue a party who has the ability to obtain such a license from another party with the right to grant it. In both of these scenarios, the exclusive licensee does not have an exclusionary right with respect to the alleged infringer and thus is not injured by that alleged infringer. Thus, the touchstone of constitutional standing in a patent infringement suit is whether a party can establish that it has an exclusionary right in a patent that, if violated by another, would cause the party holding the exclusionary right to suffer legal injury.

This court therefore holds that an exclusive licensee does not lack constitutional standing to assert its rights under the licensed patent merely because its license is subject not only to rights in existence at the time of the license but also to future licenses that may be granted only to parties other than the accused. If the accused neither possesses nor can obtain such a license, the exclusive licensee’s exclusionary rights with respect to that accused party are violated by any acts of infringement that such party is alleged to have committed, and the injury predicate to constitutional standing is met.

(emphasis added).

The court claimed to distinguish Mars, Inc. v. Coin Acceptors, Inc., but I’m not really buying it. In Mars, a sister subsidiary licensee in the UK was what destroyed exclusivity for the US subsidiary. The Mars court held that the US subsidiary was not an implied exclusive licensee because, by virtue of the license to the UK entity, the licensor had not manifested exclusivity to the US entity. But this is what we know about the terms of the license to the UK subsidiary, which I suggest is even more restrictive than the six third-party licenses granted in the WiAV case:

MEI-UK will continue to have a non-exclusive right to exploit, in the conduct of its business, the Covered Intellectual Property in any country of the world in exchange for a royalty payable to Incorporated….

Thus, prior to 1996, MEI-UK had a license: the right to practice the patents-in-suit “in any country of the world” (including the United States), in exchange for a royalty payment. MEI cannot have been Mars’s exclusive United States licensee, when the terms of the 1996 Agreements make clear that Mars had allowed MEI-UK to practice the patents in the United States. The deposition testimony of Mars’s Corporate Tax Director confirmed MEI-UK’s rights under its license from Mars. See J.A. 4130 (“Q. Were there instances where MEI-U.K. could make a product such as a coin changer and import that product into the United States for delivery to MEI, Inc.? A. That could happen, sure.”).

Mars, Inc. v. Coin Acceptors, Inc., 527 F.3d 1359, 1368 (Fed. Cir. 2008). Note that this license is limited to “exploiting” and apparently without right to sublicense. Perhaps the distinction is that the US subsidiary’s claim in Mars was of an implied license, a situation where one is rightfully skeptical of the terms.

So I think this is a significant change in the law of standing, but one I’m in favor of. It was overly technical to put licenses in buckets of “exclusive” or “nonexclusive” when, actually, the world isn’t so simple. Complex corporate structures nowadays require intracompany licenses, which will generally be nonexclusive so other sister companies may also practice a patent. The license terms may also be expansive, in contemplation of a variety of ways that a subsidiary might need to exploit the patent rights and out of reasonable caution over relying on implied rights, such as exhaustion. But those licenses do not necessarily mean that the corporate family as a whole will tolerate infringement. This test is simple and fundamental – whether the accused could otherwise obtain the rights elsewhere. Combined with the prudential considerations that ensure that a defendant will not be subject to more than one suit for infringement of the same patent, the court has struck the appropriate balance of all interests.

As an aside – WiAV named patent owner Mindspeed as “defendant patent owner” to satisfy prudential standing. Can anyone fill me in on why Mindspeed would be one the defendant’s side of the caption? Is this a clever way to solve the prudential standing problem when one has an unwilling patent owner?

Ms. Chestek is admitted to practice in Connecticut, the District of Columbia, Massachusetts, New York and North Carolina and is Board Certified by the North Carolina State Bar's Board of Legal Specialization in Trademark Law.

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